Sound Oil dips as it finds low permeability with Nervesa appraisal well

Despite finding gas, initial results from Sound Oil’s important second appraisal well at the Nervesa field in northern Italy have disappointed. While the AIM-quoted company has successfully perforated and completed seven intervals in the lower section of the reservoir where the most significant gas shows were identified, initial gas flows have shown that multiple perforated intervals are of relatively low permeability. Clean up operations are underway and the company will then decide whether to initiate a well test directly or to deploy stimulation techniques to open up the tight intervals in a bid to get a commercially viable flow rate.

In other news, Sound has decided to proceed with its entry into Morocco, acquiring a 55 per cent net working interest in the Tendrara licence. Tendrara is a large scale gas discovery, with significant exploration upside that could run into the multiple TCF. Five of the seven wells drilled to date discovered hydrocarbons and two were tested successfully. Sound’s in-house estimates suggest the existing discovered volumes are broadly comparable to those anticipated at its Badile licence in Italy, which the company has long described as a “world class” and “potentially transformational” project.

Work to date includes the seven wells, 4,400 km of 2D seismic and 500 sq km of 3D seismic, making this a project that could take off quickly for Sound, with the gas sold either into the hungry Moroccan domestic market or connected to the Gazoduc Maghreb Europe (GME) gas export pipeline. Sound will pay 100 per cent of three wells, of which only the first will be a firm commitment well.

The first well will appraise the larger of two existing discoveries to address residual reservoir uncertainties related to well deliverability and areal continuity and to prove up sufficient reserves to properly size the design of the infrastructure required to commercialize the gas.

Sound Oil’s commitment to fund the second and third wells would depend upon the results of that first well. The first well, which is expected to cost £6 million is expected to spud in Q4.
CEO James Parsons said this was the company’s “first transformational deal in pursuit of our Mediterranean gas strategy.

“The Tendrara asset, with two existing discoveries and resource potential of multiple TCF, has a very attractive risk / reward profile, builds on our core technical and commercial strengths and dovetails well with our Italian portfolio,” said Parsons.

In light of this news it has extended its open offer, which it said has received a strong response from eligible shareholders, so they can digest the impact of the material transaction in Morocco.